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Running a small business in Canada comes with various responsibilities, and managing tax obligations is one of the most crucial. Among these, navigating the complexities of GST (Goods and Services Tax), HST (Harmonized Sales Tax), and PST (Provincial Sales Tax) can be challenging. This article will focus specifically on how small businesses in Manitoba should handle these taxes, offering practical insights and tips for smooth compliance. Whether you’re a sole proprietor or a small business owner handling your bookkeeping, this guide will walk you through the essentials of managing GST/HST/PST returns in Manitoba.
GST and HST Overview
GST is a federal tax applied to most goods and services sold in Canada, currently set at 5%. Businesses that earn more than $30,000 annually are required to register for a GST account and charge GST on their taxable sales. The HST, on the other hand, is a combination of GST and PST and applies in certain provinces, such as Ontario and the Atlantic provinces. However, Manitoba does not apply HST.
For small businesses in Manitoba, this means you only need to focus on the federal GST and the province-specific PST when preparing your tax returns. Many business owners opt to work with a bookkeeper or use professional bookkeeping software like QuickBooks Online, to track these obligations accurately.
You might also like: How To Register a Business in Manitoba
Provincial Sales Tax (PST) in Manitoba
Manitoba’s PST, also known as the Retail Sales Tax (RST), is a 7% tax applied to most goods and certain services in the province. The tax is calculated on the selling price before the GST is applied. As a small business, it’s important to know which goods and services are taxable and ensure you charge the correct rate to your customers. Businesses must register for a PST account if they sell taxable goods or provide taxable services within Manitoba.
Registering for GST and PST Accounts
For both GST and PST, Manitoba small businesses need to register for separate accounts. The GST registration is done through the Canada Revenue Agency (CRA), while PST registration is handled by the Manitoba Finance Department. It’s crucial to ensure you register for both if required. Proper registration also enables businesses to claim Input Tax Credits (ITCs) for the GST paid on business-related expenses, reducing the overall tax burden.
For many small businesses, hiring a bookkeeper to handle these registrations and returns can simplify the process. A professional bookkeeper ensures that all records are kept up to date and that you remain compliant with both federal and provincial tax laws.
Filing GST/HST Returns
For businesses registered for GST, regular filing of GST returns is required. Depending on your business’s revenue, you may file monthly, quarterly, or annually. The key elements of the GST return include:
- Sales and Income: Reporting your total sales and income, including any GST charged to customers.
- Input Tax Credits (ITCs): Claiming credits for the GST paid on purchases or expenses directly related to your business.
Proper bookkeeping ensures that all these details are accurately tracked, simplifying the filing process. Bookkeepers play an essential role in making sure that ITCs are claimed correctly, reducing your overall tax liability.
Filing PST Returns in Manitoba
For PST in Manitoba, returns must be filed monthly, quarterly or yearly, depending on your business’s size. Filing frequency is determined at the time of registration, but small businesses usually file quarterly. The PST return requires businesses to report the total taxable sales made in Manitoba and calculate the tax collected.
Exemptions and Refunds
In Manitoba, certain goods and services are exempt from PST. For example, basic groceries, prescription drugs, and medical equipment are not subject to PST. Additionally, goods purchased for resale can be exempt if the buyer provides a valid Manitoba sales tax number.
Small businesses may also be eligible for refunds if they mistakenly paid PST on exempt goods or services. Keeping meticulous records through proper bookkeeping will help streamline this process. A bookkeeper can assist in tracking these exemptions and preparing documentation for refunds.
Penalties and Interest for Late Filing
Failing to file GST or PST returns on time can result in penalties and interest charges. The CRA and Manitoba Finance impose fines for late filings or underpayment of taxes. The longer the delay, the higher the penalties, which can quickly accumulate into significant amounts.
Maintaining timely and accurate bookkeeping practices ensures that your business avoids these penalties. A bookkeeper can remind you of important deadlines, ensuring that all returns are filed on time and payments are made promptly.
How Bookkeeping Helps with GST/PST Compliance
As a small business owner in Manitoba, your focus should be on growing your business, not getting bogged down by tax regulations. This is where good bookkeeping practices come in. A bookkeeper helps you track sales, calculate taxes, and ensure compliance with both federal and provincial tax laws.
Here’s how bookkeeping can support your GST/PST obligations:
- Accurate Record Keeping: Keeping detailed records of all sales, purchases, and expenses ensures you report the correct amounts on your tax returns. This also helps in claiming Input Tax Credits (ITCs) and determining exempt sales.
- Timely Filing: working along with your accountant or CPA, a bookkeeper can help you stay on top of filing deadlines preventing costly penalties and interest charges for late submissions.
- Tax Calculations: With GST and PST rates differing across provinces and types of goods, accurately calculating taxes owed can be tricky. A professional bookkeeper ensures that tax rates are applied correctly to each sale.
- Audit Support: In the event of an audit, proper bookkeeping ensures that all necessary records are easily accessible, reducing the risk of fines or additional taxes.
When is your return due?
This depends on your reporting period and the amount of revenue you’ve earned. The more you earn, the sooner you need to report and pay it. For some provinces, you need to file a return for PST on different reporting cycles.
Monthly: The filing and payment deadline is 1 month after the end of the reporting period.
Quarterly: The filing and payment deadline is 1 month after the end of the reporting period.
Annually (except those with December 31 tax year end): The filing and payment deadline is 3 months after the end of the reporting period. Annually (December 31 tax year end): The filing date is June 15. Payment date is April 30.
How can Great Start Bookkeeping help you?
At Great Start Bookkeeping, we handle the bookkeeping process and financial statement preparation for you, ensuring the timely delivery of your requested services. We also handle multiple tasks, including reconciling your accounts, categorizing transactions, and generating your financial statements.
While we do not offer tax filing services, we can collaborate with your accountant professional, or recommend one of our CPA partners to help you file your taxes. Our goal is to help you simplify your business by taking on the burden of managing and keeping your finances accurate and organized at all times. So feel free today to reach out to us to learn more about our bookkeeping services.
Useful Resources:
Manitoba GST and PST calculator
The Taxation Division Manitoba is where you can learn more, including:
- Do I need to register? brochure
- Online account access TAXcess
Conclusion
Managing your GST/PST returns is a critical aspect of running a small business in Manitoba. Understanding the tax obligations and maintaining accurate bookkeeping practices will help you avoid penalties and make the most of available tax credits and exemptions. Whether you choose to handle the bookkeeping yourself or hire a professional bookkeeper, staying on top of these tax requirements is essential for long-term success.
Small businesses in Manitoba should be particularly mindful of the province’s PST and how it interacts with the federal GST. By following the guidelines provided here, and with the support of a skilled bookkeeper, your business will be well-positioned to navigate the complexities of tax compliance effectively.
Disclaimer
Great Start Bookkeeping does not provide tax or legal business advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.
Frequently Asked Questions
Do small businesses have to register for PST in Manitoba?
No. Small businesses with annual taxable sales under $30,000 are not required to register and collect PST.
How do I register for GST and PST accounts?
To register for PST (or RST) in Manitoba, you can do so by visiting the website of the Manitoba Finance Department. The GST registration on the other hand is done through the Canada Revenue Agency (CRA).
